What Does Pro Forma TTM EBITDA Mean?
The pro forma TTM EBITDA is a projection of the trailing 12 months of EBITDA for a business that incorporates the impact of specific events or catalysts during the period. For example, if a company adds a new product through the last 12 months, then the pro forma TTM EBITDA would estimate the contribution of this product for the entire 12 month period, not just from the time it was launched. This is done to estimate what the recurring EBITDA or "run rate" will be going forward.
Divestopedia Explains Pro Forma TTM EBITDA
Buyers usually compute the pro forma TTM EBITDA of a target because they need to understand the total impact of an acquisition on their own numbers. Most buyers have their own TTM EBITDA calculated and often need to report this financial metric to their shareholders and bankers. When an acquisition is completed, the buyer will want to add the acquired company's TTM EBITDA to its own so a consolidated pro forma TTM EBITDA inclusive of the acquisition is presented. This will show the new combined entity's run rate going forward, despite the acquisition not yet being in the mix for a full 12 months.